Bulla Ltd, which uses a job costing system, had one job in process at the start of the year: Job K1 ($78 000). The following information is available: (i) The company applies manufacturing overhead on the basis of machine hours. Budgeted overhead and machine activity for the year were anticipated to be $920 000 and 20 000 hours, respectively. (ii) The company worked on three jobs during the first quarter (i.e. from 1st January to 31st March). Direct materials used, direct labour incurred and machine hours consumed were as shown in the following table: (iii) Manufacturing overhead incurred during the first quarter was $275 000. (iv) Bulla Ltd completed Job K1 and Job K3 during the first quarter. Job K3 was sold on credit, producing a profit of $30 000 for the company. Required: a) Calculate the company’s predetermined overhead rate. b) Calculate manufacturing overhead applied to production for the first quarter. c) Determine the cost of jobs completed in the first quarter
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Bulla Ltd, which uses a
K1 ($78 000). The following information is available:
(i) The company applies manufacturing
overhead and machine activity for the year were anticipated to be $920 000 and 20 000 hours,
respectively.
(ii) The company worked on three jobs during the first quarter (i.e. from 1st January to 31st
March). Direct materials used, direct labour incurred and machine hours consumed were as
shown in the following table:
(iii) Manufacturing overhead incurred during the first quarter was $275 000.
(iv) Bulla Ltd completed Job K1 and Job K3 during the first quarter. Job K3 was sold on credit,
producing a profit of $30 000 for the company.
Required:
a) Calculate the company’s predetermined overhead rate.
b) Calculate manufacturing overhead applied to production for the first quarter.
c) Determine the cost of jobs completed in the first quarter.
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